Table of contents
1. Check monthly fixed and discretionary expenditure.
2. Calculate total debt (mortgage/credit cards/overdraft).
3. Check the terms of your insurance products.
4. Evaluate investments and pensions.
5. Ensure Wills, lasting powers of attorney and expression of wish details are up to date.
6. Make that gift!

Whether you’re employed or retired, you’re likely to be affected by the response to the pandemic.

Lower interest rates on savings and companies cutting their dividend payments could squeeze incomes (and living standards) for retirees. Workers also face uncertainty – many risk being furloughed or becoming unemployed. Others have seen their earnings and profit distributions peter out. Many of our barrister clients, for example, have experienced a reduction or complete halt to their earnings.

 

So, to ensure you emerge from the crisis in the best possible financial position, here is our short checklist.

1. Check monthly fixed and discretionary expenditure.

Go through your bank and credit card statements for the past 18 months and gauge your approximate annual expenditure. Revisit your direct debits, count up the totals – and don’t forget things like travel, season tickets and subscriptions. If you have a satellite TV subscription, have you asked the provider for a refund to compensate for the lack of live sports? Don’t forget to cancel the gym membership and reclaim your travel season ticket and station parking, if applicable. Claim for that cancelled holiday!

And although life should be a little less expensive for most people, it’s important to plan for an increase in living expenses when we return to usual working habits. If your earnings have been reduced, you might have to manage on a smaller budget. If you’re in that situation, it’s worth checking that your cash is liquid and not subject to notice periods. Other matters to consider are reducing regular savings or, if you can afford it, making charitable gifts (see point six).

2. Calculate total debt (mortgage/credit cards/overdraft).

Having assessed your expenditure, consider if you require a mortgage payment holiday. And with interest rates at their lowest-ever levels, you should consider rationalising all of your debt. If you have a mortgage, re-mortgaging is an option – there are some very low rates on offer at present.

3. Check the terms of your insurance products.

Begin with financial protection, life cover, critical illness and income protection. Do you have enough cover, and are you paying the right price for it? Think about the level of cover you are paying for. It may be that you may no longer need it, if you now have sufficient assets and income. Then review your general insurance (home, second properties, art assets, etc). Here, the same considerations apply – ensure you’re fully covered, but are not paying for cover you no longer need. We came across a case where a client was still paying, via direct debit, insurance breakdown cover for an electrical item at an old address.

4. Evaluate investments and pensions.

When it comes to your investments, re-evaluate how much you can afford to save at the present time. Assess whether to make contributions to your ISA, lifetime ISA, or junior ISA. Alternatively, you might want to temporarily stop contributions to preserve cashflows. Remember; Flexible ISAs offer the opportunity to make withdrawals, which if replaced within the same Tax Year, mean you do not forsake the advantage of the ISA wrapper. Think about switches and changes in your portfolio to add or reduce risk, depending on your view of market levels, attitude to risk and time horizon. Long-term investors with a capacity for some losses (i.e. where a fall in the portfolio now won’t affect their lifestyle in the short to medium term) could likely add more equity risk to portfolios. Investors should also consider whether to ‘take profits’ to use up the annual Capital Gains Tax (CGT) allowance, perhaps also consider whether to crystallise gains above the threshold.

5. Ensure Wills, lasting powers of attorney and expression of wish details are up to date.

When was the last time you updated your Will, expression of wish form (relating to pension death benefits) and lasting powers of attorney? Now’s the time to review them.  Do you want to update or remove guardians for your children? Have your circumstances (and the people you want to benefit from your estate) changed? If the worst were to happen, would the people closest to you be looked after in the manner you would want? And do they know where to find all of the documentation?

6. Make that gift!

Finally, if you’ve reviewed your income and expenditure, your debt is manageable and your assets are more than sufficient to meet your needs, think about making a gift. Many charities are suffering a drop in receipts, due to the poor finances of some and also because donations are being redirected to NHS and care charities.

 

To find out more about ensuring those left behind after you have gone can deal with your finances, take a look at our checklist ‘planning for the inevitable’. You can also download our full Inheritance Tax guide.

If you have any questions or would like to discuss any of the information covered in this note, please get in touch.

About The Author

Ian McNally
Ian began his career in Financial Services in 1986 with Willis Faber and has subsequently gained a breadth of ...
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